Apple Explores Moves some production out of China

asks suppliers to study shifting final assembly of some products out of China, people who are familiar with the matter said, as trading tensions force the company to consider diversifying the supply chain.

While some major changes will be difficult and can take months to years to implement, Apple sees the possibility of shifting up to about one-third of the output for some devices, some said. Destinations under treatment include Southeast Asia, the people said.

No decision has been made about such a move, some of the people said. Such a transition, they said, is not likely to affect the iPhone in the short term, because the company relies on hundreds of thousands of workers available in China to produce the volume product, which also relies on human hands for mounting. as a deep network of suppliers there.

Apple is expected to launch updated iPhone models this fall. Foxconn Technology Group, the largest collector, is starting to prepare production for the models in China, others who are familiar with the case, said. Taiwan-based Foxconn said company policy precludes commenting on current or potential customers or any of their products.

"It's a bit of flexibility to move Mac and other products, but it won't be easy," said analyst Mehdi Hosseini. with Susquehanna International Group focusing on technology supply chain. "You must have relatively skilled labor. You need to create a warehouse hub. It would take time."

The situation is delicate for Apple, although many manufacturers are trying to reduce China's dependency and shift some production to avoid the higher charges. Washington imposes hundreds of billions of dollars on Chinese-produced goods. Apple relies on China for about a fifth of its total sales. Its footprint is such that it accounts for three million jobs in the country through the supply chain.

Apple spokesman refused to comment.

Apple gathers most of its products ̵

1; including iPhone, iPad and MacBook-in China through contractors such as Pegatron Corp., Wistron Corp. and Foxconn, formally known as Hon Hai Precision Industry Co.

Outsourcing to China helped to solidify Apple as one of the world's largest and most profitable companies. CEO Tim Cook helped build the company's sophisticated and efficient supply chain there, relying on Foxconn, Pegatron and others to quarrel hundreds of millions of iPhones annually.

Mr. Cook has remained neutral in the trade fair and repeatedly states that the countries would reach an agreement because it was in their best interest. He met President Trump last week and visited the office's US trade representative Robert Lighthizer in January, according to public records. He also participated in a Chinese government in March in Beijing.

Nevertheless, Apple does contingency plans. In May, the US released nearly $ 300 billion of new Chinese imports that would receive up to 25% tax already this summer, including smartphones and laptops.

To avoid this new wave of tariffs, Apple has accelerated the production and shipment of some China-made storage products, telling people who are familiar with the case.

Apple has also asked vendors whether it is possible to further cut costs, some of the people said. It would help reduce the total cost of Apple products, and in case of tariffs, Apple helps absorb some of the costs.

President Trump and Chinese President Xi Jinping will meet late in the month on the sidelines of a group of 20 summits in Japan to discuss trade disputes. Although the two sides finally reach an agreement, many technology companies will probably still feel pressured to diversify supply chains, as both Washington and Beijing see securing technology secrets and supplies that are crucial to national security.

This month, Foxconn, which gathers iPhones, iPads and Macs, said it was ready to switch production to Apple from China to existing plants, if needed. Foxconn said earlier that it had invested more than $ 213 million in its India subsidiary last year and early this year, and that it looks at Vietnam, but detailed plans have not been revealed.

Earlier this week, Foxconn issued a statement stating that it began investing in mainland China in 1988 and that it did not go.

At the same time, Pegatron is investing around $ 10 million to expand a plant on the Indonesian island of Batam, near Singapore. Pegatron switches production of some smart devices out of China to avoid the effects of the charges, according to a person familiar with the case.

Leaders in the supply chain have said that changing production can be done as fast as three months if there is already a factory building at the destination.

Nevertheless, international traits will not come easily. For example, production equipment and assembly lines will have to be dismantled, packaged, and cleared through customs before they can be shipped to a new location, an industry administrator said.

Then they must be installed, tested and calibrated, and their initial speed must be adjusted. Beyond that, some software and environmental management systems must be put in place, and people like line operators, engineers, and quality managers must be available and trained, said the person.

Apple has to approve the production lines built by Contract Manufacturers, and Apple is known to have tough standards, people who are familiar with the case said.

"It's a big leviathan," one of them said. "You can't just move these things around."

-Yang Jie contributed to this article.

Write to Yoko Kubota at yoko.kubota@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com